U.S Oil Bulls Rampage On Tight Supplies in World’s Largest Economy

Olumide Adesina
·2 min read
5

Global supply of both crude oil and refined products remained tight, as demand for solid fuels in the world’s largest economy and elsewhere picked up from the pandemic-induced slump caused by COVID-19.

After gaining 1.5% on Friday, West Texas Intermediate crude futures rose nearly a percent to trade not far from $85 a barrel. Earlier in the session, the price hit $84.76 a barrel, its highest since October 2014.

WTI bulls reached the awaited target at $84.5 a barrel and broke resistance to pave the way for further gains ahead, and it needs to overcome 84.85 resistance to confirm extending the bullish wave towards $85.8 followed by $87.3 a barrel mark.

Oil traders will therefore continue suggesting the bullish trend for the foreseeable future, noting that failing to breach $84.85 and breaking $83.9 a barrel will trigger a bearish wave that targets testing $82.1 a barrel first before any new rise tries to occur.

While demand for fuel in the United States remained strong amid tight supply, some speculators unwind short positions on the oil market

In the United States, the world’s largest fuel consumer, gasoline and distillate consumption has returned to five-year averages after more than a year of declines.

In the meantime, U.S. energy firms cut oil and natural gas rigs for the first time in seven weeks last week despite rising oil prices, Baker Hughes Co reported on Friday in a closely watched report.

Oil prices have also been raised by concerns about coal and gas shortages in China, India, and Europe, which have resulted in a switch to diesel and fuel oil.

As a result of the sharp rise in crude prices, energy analysts predict some corrections in the coming weeks.

Since WTI has gained so much this year, its percentage gains are on par with 2007 and 2009, when we also saw steep gains, which suggests that it may be overdone,

Currently, WTI futures contracts are in steep backwardation, meaning that they trade at depressed prices compared to current contracts. The price of oil typically rises in later months due to storage costs.

Oil prices remain supported by bullish sentiment despite tightening global supplies, but gains for U.S oil nearest-term contracts are limited due to steeper backwardation.

This article was originally posted on FX Empire

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